Property Law

Paul F. Sherman, Esquire

Assessor’s valuation of real property using an approved cost method is presumptively valid until rebutted with substantial and persuasive evidence showing the value excessive. Drury Chesterfield, Inc., v. Muehlheausler, Assessor St. Louis County, No. 93686 (Mo. App. E.D., August 16, 2011), Pelikan, S.J.

Drury challenged its 2006 tax assessment. The State Tax Commission sustained its hearing officer’s decision and affirmed the St. Louis County Board of Equalization’s decision, finding the assessed values for the two parcels was $23,175,400. Drury sought judicial review with the circuit court, who reversed the commission’s order as unauthorized by law in considering the total development cost. The circuit court assessed as of January 1, 2006 value at $13,900,000. Assessor appeals and review is made of the commission’s decision.

Drury purchased the land May 2004 for $5.1 million and spent over $25 million to build the Drury Plaza, which was 85% complete on January 1, 2006, but not yet open.

The assessor valued the property as of January 1, 2006 at $23,175,400. Drury appraised the property at $13,550,000. Parties agreed on the highest and best use, hotel development.

Drury’s appraisal was based on hypothetical income because no income was being produced on January 1, 2006 believing the cost approach was not applicable as the property was not completed.

The assessor considered base replacement cost more accurate than income, because the hotel was not yet in operation on January 1, 2006. The hearing officer found the cost approach more appropriate, concluding value was $23,175,400 which was affirmed by the commission.

Reviewed de novo, the assessor’s value is presumed correct unless shown incorrect. Cost, income and comparable sales are all recognized methods to determine fair market value. If no comparables, cost is appropriate. Valued is the land and building. Did Drury rebut the presumption of value with substantial and persuasive evidence sufficient?  No. True value is not absolute and cost approach is a recognized valuation method. The building was new, these costs were known, Drury failed to persuade this value was excessive.

Trial court’s judgment reversing the State Tax Commission is reversed.